Commerce for IAS – Answering a Practical Problem in UPSC
UPSC IAS Commerce Paper 1 is full of Practical Problems which can be high scoring if properly attempted. Hence, it is important to understand how to attempt any Practical Problem.
THE KEY MANTRA FOR SOLVING UPSC/IAS COMMERCE PRACTICAL PROBLEMS IS:
Solution to any Practical Problem should be provided in precise & clear-cut manner. Use of Tables is not only time saving but also marks rewarding. Instead of directly jumping to the answer, it is advisable to write 1 or 2 lines about the concept involved in the question.
An ideal solution may be as follows:
From the following particulars calculate the cost of Job No.505 and price for the job to give a profit of 25% on the selling price.
Material : Rs. 6820
Wage details: Department wise:
X : 60 hrs @ Rs. 3 per hr Y : 50 hrs @ Rs. 3 per hr Z : 30 hrs @ Rs. 5 per hr
The variable Overheads are as follows: Department wise:
X : Rs. 5000 for 5000 hrs Y : Rs. 4000 for 2000 hrs Z : Rs. 2000 for 500 hrs.
The total fixed expenses amounted to Rs. 20,000 for 10,000 working hours.
Calculate the cost of Job No. 505 and price for the job to give a profit of 25% on selling price.
The question pertains to Job Costing – A popular method of costing used in Job Order Industries.
The cost of completed job will be the materials used for the job, the direct labor employed for the same and the production overheads and other overheads if any charged to the job.
Based on the given problem:
|Wages||Deptt X – 60*3||180|
|Deptt Y – 50*3||150|
|Deptt Z – 30*5||150|
|Variable Overhead||Deptt X – 60*1||60|
|Deptt Y – 50*2||100|
|Deptt Z – 30*4||120|
|Fixed Overhead||Total Hrs (140) * Absorption Rate (2/-)||280|
|( Absorbed @ 2/- per hr)|
|Total Cost||7860 (A)|
|Profit Margin||25% on sales or 1/3rd of Cost||2620 (B)|
|Selling Price||10480 (A)+(B)|
Hence, the selling price should be Rs. 10,840 /-